How to Identify a Residential Complex Property
By: McKissock December 16, 2022
Excerpts: The property to be appraised is atypical
In this case, the property is an outlier, oddball, or not common for the particular area. Of all the characteristics that can make a property complex, physical features are the ones that are most obvious. Some of the key physical features that can make an appraisal assignment complex include:
The form of ownership is atypical
In this case, circumstances involving ownership are uncommon or make the appraisal more complex. For example: The owner doesn’t own property rights on a waterfront property.
The market conditions are atypical
In this case, unique market conditions increase the complexity of the appraisal. For example:
The property is located in an area where there are no other sales.
There is no market for the house; no sales are occurring for some reason (e.g., the property is near a nuclear site cleanup).
Note: the link to the complementary post, “How to Pull Comps on a Complex Property,” is included in this blog post.
To read more, click here
My comments: Worth reading with good tips. I published “Tips for dealing with complex residential appraisals” in the November issue, much longer with many more tips and examples.
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To read more of this long blog post with many topics, click Read More Below!!
NOTE: Please scroll down to read the other topics in this long blog post on mortgage rate forecast, Humor, adjustments, George Dell, unusual homes, mortgage origination stats, etc.
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12 Days of Appraiser Christmas
Very funny!! Only 3.5 minute long video. Take a Brief Break for Some Appraiser Fun!!
Many thanks to Gary F. Kristensen, SRA, ASA, IFA, AGA at A Quality Appraisals in Portland, Oregon.
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Santa’s House
A winter lover’s paradise nestled on 25 idyllic acres. The property includes Santa’s main living quarters, a community of tiny elf homes, a state-of-the-art toy-making facility, garage with space for an all-weather sleigh and stables that board eight live-in reindeer, plus a bonus stall for red-nosed company.
Follow Santa’s Christmas Eve journey from his North Pole home via the Official NORAD Santa Tracker
Lot: 25 acres
Home type: Single family
Floor size: 2,500 sqft
Year built: 1822
Last remodel: 2013
Features
Multiple 150 sqft Cottages
Santa’s Toy Workshop
Reindeer Stables
Sleigh Parking Garage
Home value (with no comps, not even close to 30!)
Zestimate $1,154,137
Estimated sales range: $197,266 – $1,154,137
To read more and see lots of photos, click here
My comments: Lots of fun. Check out the photos and a graph showing price appreciation.
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Lots of details for Residential Non-Lender appraisals!
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Surprising Things That Can Decrease Property Value
Excerpts: #3 Unappealing home exterior
The “curb appeal” of a house is the first impression it gives to passers-by. Therefore, while preparing for a home appraisal it’s important to work on improving your home’s exterior. Not only that this will help you boost the value of your home but it will also help you attract buyers and sell it quicker.
#5 A home that’s too personalized
Potential purchasers are keenly aware of the work that will need to be done on a home during a viewing. Removing wacky wallpaper, painting over strange hues, and changing unconventional fittings are at the top of their priority lists. If you’re going to go for an unusual look, make it easy to undo before putting your home on the market.
To read more, click here
My comments: Written for homeowners, but useful reminders for appraisers. I don’t know if they all decrease the value in a particular location or market, but they are red flags.
I have done many relocation appraisals, where you advise the relocation company about the condition and recommend fix-ups, whenever possible, such as cluttered homes and new interior and exterior paint.
I often see myself as a neutral advisor on fix-ups and other changes before selling. This situation is very common in estate appraisals, where the home needs work before putting on the market. Sometimes they don’t trust real estate agents.
I always tell them that the value will increase much more than the fix-up cost. Also, the home will sell quicker. If they don’t have any money, I tell them to clean it so they can eat off the floors.
I let the owners, who may be selling the property, know about marketability issues. Not fixing these problems can affect the final sales price. In a slow market, of course, this can become more of a problem. In my market, most homes are listed and staged. I tell them the ideal is to make your home look like a model home in a new subdivision.
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393-Acre Property in Fayetteville, AR, Comes With a 1.2-Mile Racetrack
Excerpts: “It’s for racing real cars. It runs right by the house, so you can do events and watch the race from down below or the top deck,” says listing agent Daniel Short, with True North Realty Group.
The 7,764-square-foot mansion, 30,000 square feet of metal outbuildings, and 393 acres are listed for $6.7 million. But the list price may change as there is a sale pending for some of the flood plain land for watershed conservation.
Short says the remaining land could be further subdivided.
Several outbuildings have everything a car enthusiast needs.
“He’s got car lifts, a paint booth, a wash bay, a place to do tire work, and [a location to] store racing fuel. He can work on every car he has,” Short says. “He’s also got the largest privately owned solar complex in Northwest Arkansas.” That means no power bills.
To read more and see many interesting photos, click here
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Is 30 comps enough?
By George Dell, MAI, SRA
Excerpts: Historical appraisal practice, as passed on from trainer to trainee, in the outdated master/apprentice model that imposed strong inviolable dictates. For residential forms, the magic number was three, sometimes up to five or six. Three and a subject column fit perfectly on a 8 1/2 x 14 paper! Wonderful.
USPAP requirements have an internal self-contradiction about how many comps are required for the “believability” measure. On one hand, the requirement for “an acceptable scope of work” endorses the stated historical practices. (The standards require us to do what our peers historically do — right or wrong.) On the other hand, Rule 1-4 states the appraiser must use “all information necessary ” and “such comparable sales data as are available.” Which is it? All competitive sales, or just 4 or 5?
Sometimes the ideal data set size will be 3, or 13, or 33. Only by chance will it be 30, or any other particular number. If appraisers are required to use any arbitrary number, the result will be less than optimal. Modern valuation progress requires three things: 1) a clear definition of “what is a comp?” 2) Appraiser training to reflect this simple data analysis rule; and 3) standards and user requirements (such as the GSE’s) that require this basic data science issue to be evaluated in every appraisal.
To read what more, click here
My comments: George continues on his long-time quest to really modernize residential appraisals, not just designing another type of online report or speeding up the appraisal process with AVMs and desktops. Don Quixote?
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HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, go to www.mba.org Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample go to www.appraisaltoday.com/order Or call 510-865-8041, MTW 7 AM to noon, Pacific time.
My comments: Rates are going up. Some appraisers are very busy, and others have little work. Varies widely around the country.
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Mortgage applications increased 0.9 percent from one week earlier
Mortgage applications increased 0.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 16, 2022.
The Market Composite Index, a measure of mortgage loan application volume, increased 0.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index increased 6 percent from the previous week and was 85 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 36 percent lower than the same week one year ago.
“The Federal Reserve raised its short-term rate target last week, but longer-term rates, including mortgage rates, declined for the week, with the 30-year conforming rate reaching 6.34 percent – its lowest level since September,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Refinance application volume increased slightly in response but was still about 85 percent below year-ago levels. This is a particularly slow time of year for homebuying, so it is not surprising that purchase applications did not move much in response to lower mortgage rates.”
Added Fratantoni: “The latest data on the housing market show that homebuilders are pulling back the pace of new construction in response to low levels of traffic, and we expect this weakness in demand will persist in 2023, as the U.S. is likely to enter a recession. However, if mortgage rates continue to trend down, as we are forecasting, more buyers are likely to return to the market later in the year, as affordability improves with both lower rates and slower home-price growth.”
The refinance share of mortgage activity increased to 31.3 percent of total applications from 29.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 7.5 percent of total applications.
The FHA share of total applications decreased to 13.0 percent from 13.1 percent the week prior. The VA share of total applications increased to 11.9 percent from 11.5 percent the week prior. The USDA share of total applications remained unchanged at 0.6 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.34 percent from 6.42 percent, with points decreasing to 0.59 from0.64 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200)decreased to 5.97 percent from 6.14 percent, with points increasing to 0.53 from 0.42 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.35 percent from 6.40 percent, with points decreasing to 0.99 from 1.03 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.81 percent from 5.92 percent, with points decreasing to 0.53 from 0.54 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs decreased to 5.43 percent from 5.58 percent, with points increasing to 0.95 from 0.80 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
Please Note:
MBA Offices will be closed Monday, December 26, 2022 and will reopen on Tuesday, January 3, 2023. Due to the holiday, the results for weeks ending December 23, 2022 and December 30, 2022 will both be released on January 4, 2023.
The survey covers over 75 percent of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100.
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Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501
Phone 510-865-8041
Email ann@appraisaltoday.com
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